June 2009

REALTOR ECONOMIST SAYS HOUSING MAY BE UNDERVALUED

Lawrence Yun, chief economist of the National Association of Realtors (NAR), told members of his association that home prices could be bottoming out and if they go any lower, it would be an “overcorrection.”

“We’re only capturing transaction prices,” Yun said to fellow Realtors at the Realtors Midyear Legislative Meetings in Washington last month. Since about half of the real estate transactions are “distressed sales,” the transaction prices could be as much as 25% less than actual values, he said.

The economist reported the median home price to be about $160,000, down 14% from what it was at the time in 2008 and 30% below its peak.

“My projection is that home sales will be 10-to-20% higher in the second half of this year,” he said, “and we will come out of this recession in 2010.”

HOME OWNERSHIP AT LOWEST PERCENTAGE SINCE 2000

The Census Bureau reported the U.S. home ownership rate was 67.5%, the lowest it had been since 2000. Homeownership percentage peaked at 69.2% in the first quarter of 2005.

Homeownership rates were higher in the Midwest (70.7%) and the South (69.6%) than they were in the Northeast (63.7%) and the West (62.8%). Homeownership by age group was highest in the 65-years-and-over category (80.4%), followed by ages 55-64 (79.8%), 45-54 (74.6%), 35-44 (65.7%) and under 35 (39.8%).

The report estimated there were a total of 130.4 million housing units in the country during the quarter and that about 15% of them were vacant. Owner-occupied housing units made up about 57% of the total and about 28% were occupied by renters. Of the 15% that were vacant, 4% were for seasonal use.

BANK DESTROYS NEW FORECLOSED HOMES

Guaranty Bank of Austin has demolished 16 new homes in Victorville, Calif., after acquiring them through foreclosure. The development was located in San Bernardino County in suburban Los Angeles.

Some of the houses were unfinished and squatters were using them, where they drew graffiti and left drug paraphernalia, causing warnings of fines from city officials. Average housing prices in the county have declined 60% from their peak in 2006. Ultimately, the Texas-based bank decided the cost of maintaining and finishing the development would be less expensive than that of finishing the project and trying to sell the homes in the depressed market.

“We would have hoped for these houses to be finished,” said George Duran, Victorville’s city code enforcement manager, “but it’s up to the owner to see what is best for them.”

ASK MARTITIA

QUESTION:  While reviewing an appraisal, I saw no mention of a sale of the subject property that took place six months before the appraisal. The local Multiple Listing Service, which most of the appraisers in that area subscribe to, reported the sale, but the appraiser of this property said he didn’t subscribe to it and checking it was “not within my normal course of business.” Is the appraiser’s reason for not checking the MLS records acceptable?

MARTITIA: Not at all. This appraiser does not have a valid excuse for overlooking the fact that the property had been sold six months before the appraisal. This level of diligence would be expected of anyone performing a real estate appraisal.

Martitia Mortimer, Elliott’s executive vice president, answers appraisal questions on a regular basis in Elliott Real Estate News.

QUOTES

“Summer is a promissory note signed in June; its long days spent and gone before you know it, and due to be repaid next January.” – Hal Borland

“We hope that, when insects take over the world, they will remember with gratitude how we took them along on all of our picnics.” – Bill Vaughan

“A thief believes everybody steals.” – Edward Howe

“No amount of study or learning will make a man a leader unless he has the natural qualities of one.” – Archibald Wavell

“A camel is a horse designed by a committee.” – Alec Issigonis
 

Newsletter Editor: kevin@elliottco.com
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